Gold Technical Analysis: Global Tensions May Support the Gold Market

The price of gold XAU/USD is on its strong upward trajectory and is likely to gain further in the event of increased tensions and the expansion of the war in the Middle East.

  • Global geopolitical tensions, led by concerns in the Middle East region, continue to support the price of gold in obtaining more gains.
  • Considering this fertile safe haven environment, the price of gold (XAU/USD) rose towards the resistance level of $2010 per ounce, its highest level in five months, and stabilizes around the level of $1993 per ounce at the time to write the analysis, waiting for anything new.
  • Obviously, the decisions of global central banks this week, led by the US Federal Reserve, may not have a strong impact, as is the case with the reaction to developments on the ground in the Middle East.

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Geopolitical Tensions Driving the Price of Gold

According to metal market trades, the price of gold and silver moved in two separate ways, with the price of gold rising and the price of silver falling, as Gaza news headlines today pushed gold to rise significantly. In general, the recent acceleration could push the price of the precious metal to a new record level.

Recently, the price of gold rose nearly 10% this month despite rising US bond yields and the resilience of the US dollar, driven primarily by its appeal as a safe-haven asset amid geopolitical tensions in the Middle East. Historically, its inverse relationship with real yields and the dollar, which is usually strong and reliable, based on the spread between assets measured daily over a forty-day period, has recently diminished. Impressively, its return has seen the price of the yellow metal reach the $2,000 per ounce threshold, bouncing back from October lows of around $1,810. Speculators, motivated by geopolitical tensions and buying pressure from funds that shifted from short positions to net long positions, fueled this recovery. However, total holdings in bullion-backed ETFs continued to decline as asset managers continued to focus on the strength of the US economy, rising bond yields, and the cost of holding non-interest-bearing precious metals.

With the market's attention now turning to developments in the Middle East, gold's current price action, within a sharp upward channel, indicates the strength of its rally and the need for consolidation, as noted by Saxo Bank's Ole Hansen, who concluded that "a close above the $2,000 resistance level could push... The price of gold is beyond the previous record highs seen around $2,050 in May of this year and March 2022.

According to the latest developments, the situation between Israel and Hamas is the most urgent for the markets in general and for gold in particular. Also, American aircraft bombed Hamas sites in Syria. Meanwhile, Russian President Putin invited senior Hamas and Iranian leaders to Moscow for talks, perhaps to America's annoyance. With the Western coalition unequivocally supporting Israel and Russia with their interests in mind, the conflict in Gaza threatens to widen.

For gold traders, it appears that we have entered a deteriorating situation early. Nearby, the fear must be that the Western coalition is pushing the border as far as it can to protect the Israelis. The bigger picture is not to give more ground to the Asian powers that dominate influence in the Middle East. Surly, the Saudis play a key role in this matter, as they are no longer subject to the United States, and are working with Russia and Iran to control oil prices. According to this new reality, If the United States were to turn toward Iran, Iran would likely retaliate by closing the Strait of Hormuz and driving oil prices skyrocketing.

A final word on America's deteriorating financial situation: gold is now rising along with US Treasury yields.

Gold price forecast for XAU/USD today

According to the performance on the daily chart below, the price of gold XAU/USD is on its strong upward trajectory and is likely to gain further in the event of increased tensions and the expansion of the war in the Middle East. This increases the attractiveness of gold to investors as a safe haven, therefore preparing to test stronger peaks, the closest of which are currently 2025, 2045, and 2060 dollars, respectively. However, investors may not care much about the movement of technical indicators towards strong buying saturation levels as much as monitoring developments on the ground in the Middle East, and it seems that the situation will take more time.

Gold chart

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Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.